Many homeowners--not to mention contractors and lawyers--are surprised to learn that "home improvement projects" are subject to a dizzying array of consumer protections and restrictions not found in commercial construction jobs. A contractor's failure to comply with the provisions of Sections 7150 to 7168 of the California Business & Professions Code and the rule promulgated thereunder (the "Home Improvement Law") can jeopardize his contract with the homeowner and can subject the contractor and his license to legal and administrative penalties. Conversely, the failure of a homeowner or his representative to insist on the protections afforded by the Home Improvement Law can subject the homeowner to unnecessary risks and disadvantages which are otherwise easily avoided.

One of the most striking aspects of the Home Improvement Law is its scope. The California Business & Professions Code defines a "home improvement" very broadly, to include the repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property (both the structure and/or land). The statutory definition specifically lists work to driveways, swimming pools, spas/hot tubs, terraces, patios, awnings, storm windows, landscaping, fences, porches, garages, fallout shelters, basements, and other improvements of the structure or land. The minimum dollar threshold for coverage of the Home Improvement Law is only $500, with no maximum dollar amount. Thus, just about any work performed to or goods delivered for installation in or on a residential structure or adjacent land for the occupant will likely constitute a home improvement.

Any contractor who provides home improvement services is bound by the Home Improvement Law. After July 1, 2000, a contractor may not provide home improvement goods or services unless he is certified as a "home improvement contractor" by the California Contractors State License Board (the "Board"). While the certification process is rather simple and requires no technical contracting knowledge or expertise, it does demand an awareness of the various rules and regulations imposed under the Home Improvement Law.

The various rules and procedures imposed by the Home Improvement Law fall into three general categories, as follows:

1. Financial. Perhaps the most immediately significant provisions of the Home Improvement Law are those which impact the financial arrangement between the parties.
   • Of the financial provisions, the most significant is probably the limitation on the downpayment which a contractor may lawfully demand. In no event may the downpayment exceed one thousand dollars ($1,000) or 10 percent of the contract price, excluding finance charges, whichever is less, or two hundred dollars ($200) or 2 percent of the contract price, for swimming pools. As written, this provision is mandatory, and accordingly, the contractor and homeowner may not "opt out"-consent to an alternative arrangement.
   • Other than the downpayment discussed above, in no event may the contractor actually receive payments in excess of 100 percent of the value of the work performed on the project at any time, excluding finance charges. Thus, a payment schedule requiring fixed payments on certain dates may only be enforceable to the extent that such payment reflects the level of performance of the work at the time.
   • The contract must be completed for the agreed price (subject, of course, to changes in the price based on change orders). Failure to do so constitutes a violation of the Act.
   • If the contract provides for payment of a commission to a salesperson, the payment shall be made on a pro rata basis in proportion to the schedule of payments to the contractor.
2. 
   Contract-At a minimum, the contract must contain the following provisions:
   
   • If the work costs more than $500, the contract must be in writing.
   • The contract must contain an approximate start and completion date, and an explanation of what constitute substantial commencement. It should be noted that the contractor's failure to commence work within 20 days from the specified commencement date may be a violation of the Home Improvement Law.
   • The contract must contain a plan and scale drawing showing the shape, size, dimensions, and construction and equipment specifications for a swimming pool; and for other home improvements, a description of the work to be done and description of the materials to be used and the equipment to be used or installed, and the agreed consideration for the work. The contract must expressly recite any brand name or quality-level of merchandise, where promised.
   • As discussed above, the contract must contain a schedule of payments showing the amount of each payment as a sum in dollars and cents (tied to a certain level of work).
   • The contract must address the mechanics of change orders, including the information to be included in any change order.

     If the contractor wishes for disputes to be settled by private arbitration, then the contract must set forth the state-mandated disclosure language exactly. Failure to do so may result in the contractor's loss of its right to insist on this remedy.